Short Guide to Bankruptcy
Laws
Page 1
Bankrutpcy is a legal procedure
in a federal court to relieve certain debts of a
person or a business that is no longer able to
pay its debts. Private individuals have two main
options when declaring bankruptcy:
Chapter 7 –
A trustee is appointed to take
over your property. Any property
of value will be sold or turned
into money to pay your creditors.
You may be able to keep some
personal items and possibly real
estate depending on the law of
the State where you live and
applicable federal laws. If
successful, you will be
discharged from your debts in
about 90 days.
Chapter 13 –
You can usually keep your
property, but you must earn wages
or have some other source of
regular income and you must agree
to pay part of your income to
your creditors. The court must
approve your repayment plan and
your budget. A trustee is
appointed and will collect the
payments from you, pay your
creditors, and make sure you
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live up to the terms of
your repayment plan. If successful, you can
expect to be discharged from your debts in 3
years or 5 years, depending on your payment plan.
Chapter 12 – Like
chapter 13, but it is only for family
farmers and family fishermen.
Chapter 11 – This is
used mostly by businesses. In chapter 11,
you may continue to operate your
business, but your creditors and the
court must approve a plan to repay your
debts. There is no trustee unless the
judge decides that one is necessary; if a
trustee is appointed, the trustee takes
control of your business and property.
This Short Guide focuses on
Chapter 7 and 13.
One of the reasons people file
bankruptcy is to get a “discharge.” A
discharge is a court order which states that you
do not have to pay most of your debts. Some debts
cannot be discharged. For example, you cannot
discharge debts for–
most taxes; child support;
alimony; most student loans; court fines and
criminal restitution; and personal injury caused
by driving drunk or under the influence of drugs.
The discharge only applies to
debts that arose before the date you filed. Also,
if the judge finds that you received money or
property by fraud, that debt may not be
discharged. (4) http://www.usdoj.gov/ust/
New Changes to the
Bankruptcy Law
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Important changes were made
to the bankruptcy law in 2005. Enacted on
October 17, 2005, The Bankruptcy Abuse
Prevention and Consumer Protection Act
was designed for the sole benefit of the
creditor. It makes it harder for debtors
to file for "fresh start"
Chapter 7 and steers them more toward
repayment plan Chapter 13. Under both
plans, the criteria for filing, process
and liability is filled with pitfalls,
traps and intentional barriers that some
critics say are designed to intentionally
make debtors fail, nullifying the
bankruptcy proceedings, sending debtors
back to their original starting point
with even more money lost.
This change in the law
was hard fought for by the credit card
companies and other lenders seeking
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greater protection from
"dead beats" and "losers" who
were gaming the system.
While no sympathy is spared to
those who did manipulate the system, the credit
card companies are just as guilty at creating the
high rate of bankruptcies they now enjoy wider
protection from. Over the last 6 to 7 years,
credit card interest rates have been deregulated
and credit card companies wasted no time in
taking advantage of consumers with mafia style
interest rates.
By the end of the 1990s, US
citizens carried more then $500 billion in
outstanding credit card debt. Soon thereafter,
consumer credit interest rates were deregulated,
which is why it is now possible to carry cards
with interest rates of 30 percent or more. This
means consumers carry this amount, on average, on
their cards rather than paying the balance off
each month. Interest rates on credit cards range
from 0 to 39 percent. [ Does the mafia even
charge that much?] and people who will have
trouble paying off the debt they have accumulated
are naturally charged the higher interest rates. (1)
Although the new bankruptcy law
does a great job of protecting credit card
companies from consumers, the federal government
has not protected consumers from credit card
companies enforcing interest rates (not including
penality fees) that are near as can be to usury.
(Charging a rate of interest greater than that
permitted by law.)
Let's take a closer look at how
the new law works.
Continued
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Your Credit Cards | 101 Great
Money Saving Tips
Guide
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Foreclosure Laws | Guide To
Consumer Credit Counseling
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